We’re sure you’ve heard a lot of talk these days about the growth and influence of Groupon, but is it worth it for your business?
Groupon is a website that offers deal-of-the-day promotions from different businesses (restaurants, salons, bowling alleys, bookstores, etc…) specifically catered for 100’s of cities in the United States, as well as abroad. Here’s how it works:
- At midnight a Groupon is offered for 24-72 hours (deals on Friday are generally available through the weekend) in the city that your business is located
- If a certain number of people sign up for the offer, the deal becomes available to all, otherwise no one gets the deal that day.
- In return, Groupon then receives a cut of the deal from the retailers.
Like any marketing technique there are positives and negatives associated with enrolling your business in the Groupon offers. Let’s take a quick look at a few of those risks and benefits before deciding on whether or not your business should get its Groupon. The negatives include,
- A successful deal could temporarily swamp your business with too many customers. This could leave customers unsatisfied, or that there won’t be enough product to meet the demand. There have been many stories of nail salons being understaffed and sushi restaurants that run out of rice on a overly busy Saturday night. These scenarios could make these potential repeating customers into one-time disappointed customers.
- The Groupon is discounted by at least 50%. Then Groupon receives 50% of the sale, leaving you with only 25% of what you would usually make on a product or service.
- Because Groupon’s are offered daily and many competing websites have popped up- some people will not return to the business without a deal. Customers begin to think, “Why eat at business X, without a deal when business Z is offering a deal?,” or that they would rather wait until you offer a Groupon deal before they come in.
- You will not receive your new clients contact information (i.e. Email, phone number, mailing address)
On the other hand there are plenty of positive reasons for your business to get its Groupon:
- Groupon does all the advertising for you and you only pay if and when you attract purchasers.
- For the most part, you are guaranteed a rush of new customers.
- Groupon users typically spend more than the value of their original Groupon (I can personally attest that I have spent more than the Groupon’s value EVERY time I redeem it)
- Thousands of Groupon subscribers will receive an email about your business- some will buy some will not, but EVERYONE will see it.
When you consider the risks and benefits of Groupon, the benefits definitely outweigh the risks. Here are two tips to make your Groupon experience a successful one:
- The value of the Groupon should not cover 100% of the cost of the meal. If the average bill for 2 diners at your establishment is $28- offer a $20 deal for $10. You lose a portion of the first $20 to the advertising, but the rest is yours to keep.
- Put a limit. If your business cannot handle 1000 patrons, limit the number of Groupon’s you are offering. Limited Quantity Groupon’s are also highly desirable. Since the buyer does not know the preset quantity, they are more likely to make an impulse buy so they do not miss out on the deal.
- Encourage these new clients to LIKE your Facebook and Twitter pages to keep them up-to-date on other promotions and info about your business.
In the end, it’s great advertising, just be aware of the risks to make sure you optimize your experience.
Has your business participated in Groupon? Tell us about your experience and what tips you have for other business owners.